Whether you own just one rental property or you’re growing your portfolio steadily unit by unit, the goal of your investment is to make money. The more money you’re able to earn on those properties, the higher your return on investment, or ROI.
The ROI you earn depends on a number of factors including how your investment was financed, what you’re earning in rent, and what you’re spending on both fixed and variable expenses.
Investors are always asking us how to increase their ROI. What can you do to increase your rental income and help your rental property business succeed? In many cases, it depends on your unique circumstances. You’ll have your own set of investment goals and plans.
However, there are a few things that apply to all investors and all properties.
We’re sharing six tips today, based on our experience as a Colorado Springs property management company. These are some of the most important things you can do to get the best return on your Colorado Springs investment property.
1. Avoid Vacancy with an Exceptional Colorado Springs Rental Property
Avoiding vacancy and keeping your rental property occupied with the most rent possible coming in is a great way to increase what you’re earning. Ideally, you won’t have more than a few weeks of vacancy when you’re renting out the home for the first time or turning it over between tenants.
Preparing your rental property for the market is an essential part of attracting good tenants, setting high rents, and having a successful and profitable rental experience. Invest some time, resources, and expertise into preparing your property for the rental market. You’ll see a difference in what you’re able to charge and how quickly you find a tenant for the home.
Typically, cosmetic changes and cleaning will really be the only things to worry about, unless major work is needed. Here’s where to focus your efforts when preparing the property for the rental market:
- Make sure everything works. Tenants will not feel great about their rental experience when they have to make multiple maintenance requests days after moving in.
- Have the property professionally cleaned. Tenants will not want to move into someone else’s dirt.
- Check out the landscaping and curb appeal. First impressions matter, and you don’t want tenants to avoid your home because of how it looks.
You’ll earn more money on your investment when you begin marketing a property that’s move-in ready. The sooner you get a tenant in place, the sooner you’re able to collect rent.
2. Increase ROI with Better Marketing
Tenants actually have a huge impact on the returns you earn on your investment.
A good tenant will deliver higher earnings and a bad tenant will only cost you more money.
You’re looking for tenants who will pay rent on time, take care of the property, and follow the rules and terms of the lease.
You need to know where and how to market your property effectively. Try to draw as many potential applicants to your property as possible so you can choose the best-qualified applicant.
The right marketing also allows you to reduce your vacancy loss, thus increasing what you earn.
Make sure you’re listing your rentals on the right websites. Include high-quality photos with your listings. The more pictures you include, the better. You don’t want potential tenants wondering if a bedroom has an en-suite bathroom or if there’s any outdoor space.
Photo quality is important because the pictures are the first things that tenants will look at when they open your listing. Then, they’ll read the description, which should be detailed but not too wordy. Include the pertinent information, including rental amount, whether pets are allowed, and when the home will be ready for occupancy. Share square footage and the number of bedrooms and bathrooms.
Smart marketing will help you find a better tenant and earn higher rents.
3. Put Together a Consistent and Enforced Rent Collection Policy
You aren’t making any money on your investment property if tenants aren’t paying rent on time. When your renters pay late, you have to spend time, energy, and resources collecting those overdue payments. If you ultimately have to evict them, you’re going to spend more than you’d like on the court process and the length of time that no rent is coming in with your property.
Increase what you earn by enforcing a consistent rent collection policy, which should state:
- How much rent is due every month.
- When that rent is due, and whether there are any grace periods.
- What the consequences will be for late rent, including late fees and potential eviction.
- The methods in which rent will be collected.
It’s in your best interests to accept online payments, payment by check or credit card, and even money orders or cash through third-party merchants like 7-11 or Walmart.
Include the rent collection policy in your lease agreement, and discuss it with your tenants before they move in.
Screen your tenants for timely payments and good credit. This will help you avoid the potential for chasing down late rent or making threats about eviction.
Late fees are useful. They encourage people to pay on time, and they also provide you with a bit of compensation if rent payments are late. If you do find yourself having to evict, always talk to an attorney or a Colorado Springs property management company. There’s a strict legal process that must be followed.
4. Focus on Tenant Retention for Better ROI
Reducing turnover will absolutely increase what you earn on your investment property.
Turnover between tenants requires you to put some extra work into your property. You’ll need to make any repairs that are the result of normal wear and tear. You’ll likely have to paint, clean the floors, and maybe make some cosmetic updates. You’ll have to change the lock and pour some resources into marketing the property for new tenants.
Instead of going through all that, work hard to retain your existing tenants. You want them to stay in your rental property for as long as possible. That means less vacancy, less turnover – and lower expenses.
There are several ways to encourage tenant retention:
- Effective maintenance responses
- Good tenant relationships
- Communication and technology
- Accessibility and availability
- Upgrades and updates to the property
- Reasonable rental increases
5. Choose Better Tenants with a Strict Screening Process
Good tenants earn you more money, and the best way to find those good tenants is by screening for them.
Some people trust their instincts, and that’s great. But when it comes to screening, forget what your gut is saying. Instead, focus on the data and verify everything.
Look for tenants who will help you earn higher returns. You can do this by including the following in your screening process:
- Check rental history. Collect contact information for previous landlords on your application. Call the landlords to ask about the tenant’s payment history and how they treated the places they used to live. Ask about property damage, whether proper notice was given before moving out, and if they’d rent to that tenant again.
- Look for prior evictions. Think twice before you rent to a tenant who has been evicted, especially recently. There are always alternatives to eviction, so if the tenant you’re considering was legally evicted from a property, that’s probably not a tenant you want to work with.
- Verify income. You want to rent to a person who has enough money to pay their rent. You can ask for paystubs and W-2s to verify a potential tenant’s income. If a person recently moved for a job, ask to see an offer letter that outlines how much they will earn. Ideally, your tenants will earn at least three times the amount of rent you’re charging.
- Credit. Run a credit check on potential tenants to see if they have a history of paying any credit accounts late and if they owe money to former landlords or utility companies
6. Work with a Colorado Springs Property Management Company
Property managers often deliver higher returns for the owners they work with. When you have an experienced team of experts leasing, managing, and maintaining your rental property, you have a lot less risk and a lot more opportunity.
Property managers will help you avoid vacancy, keep your property well-maintained, and monitor the behavior of your tenants. It’s the best way to ensure you’re earning everything you can on your investment property. You’ll also see the results in the accounting statements and financial reports that are provided every month.
Making a property as appealing as possible to tenants, screening potential tenants carefully, and putting together a plan for regular repairs and maintenance will help you make the most of a rental property. Working with your Colorado Springs property management partner will ensure you have a successful and profitable rental experience.
If you’d like to hear more, please contact us at Muldoon Associates.